In response to the COVID-19 pandemic, the IRS published Notice 2021-10 which aims to provide relief for Qualified Opportunity Funds (QOFs) and their investors. This guidance postpones a number of due dates and timeframes for complying with the Qualified Opportunity Zone tax requirements.
- QOF investors are required to reinvest their capital gains within 180 days of realizing their capital gain or another specified date. The notice provides investors with an automatic extension to make a timely investment in a QOF. If the last day of the 180-day investment period where an investor must make an investment in a QOF falls on or after April 1, 2020, and before March 31, 2021, the last day of the investment period is postponed to March 31, 2021.
- The notice also provides automatic forgiveness to a QOF that fails to satisfy the 90% asset test. If the last day of the first 6-month period of the QOF’s taxable year or the last day of a QOF’s taxable year falls within the period April 1, 2020, through June 30, 2021, the failure to satisfy the 90% asset test will be deemed to be due to reasonable cause.
- The notice extended the 30-month substantial improvement period for tangible property. This extension is for tangible property that was owned as of April 1, 2020, or acquired after through to March 31, 2021. Under this extension, QOF’s have an additional 12 months to satisfy this requirement extensions the period up to 42 months.
- The notice also extended the working capital safe harbor period, giving QOF’s that operate through a qualified opportunity zone business up to an additional 24 months to expend the working capital assets. To receive this extension the QOF operating through a qualified opportunity zone business must have assets held as working capital assets intended to be covered by this safe harbor prior to June 20, 2021.
All relief provided by Notice 2021-10 is automatic and requires no elections. Please consult your WG tax advisor to inquire about the above tax relief for which you may qualify.